If the Israel-Hamas war continues for some time, the rupee may fall by about 3-4 percent against the US dollar. In such an environment, the cost of repaying foreign loans to telecom companies may increase. There may also be an impact on profitability in the coming quarters.
Israel-Hamas war can have a big impact on the telecom sector. Due to this war, the cost of imported gear used in 5G network may increase by Rs 2000 to 2500 crore in the initial phase. This can create problems for India's top telecom companies. It is estimated that the speed of 5G rollout that has started in India may slow down.
According to the report of Economic Times, if this conflict continues for a long time, then the rupee may see a decline of about 3-4 percent against the US dollar. In such an environment, the cost of repaying foreign loans to telecom companies may increase. There may also be an impact on profitability in the coming quarters. In fact, a major part of the $7 billion telecom sector loan is in dollars.
About 67 percent of the telecom gear used in the local phone network is imported from foreign vendors like Ericsson, Nokia and Samsung. This is why big telecom companies like Reliance Jio, Bharti Airtel and Vodafone Idea (Vi) are collectively estimating to spend about $ 7 billion on imported networks.
Dollar may fall by 3 to 4 percent
Rohan Dhamija, head (India and Middle East) at Analysis Mason, while speaking to the media, said that the rupee has not yet declined worrisomely against the US dollar due to the Israel-Hamas war, but if it appreciates, the currency will lose some value. There may be instability and the rupee may potentially depreciate by 3-4 per cent. He said that the US dollar, which will make the import of 5G network gear of telecom companies expensive. The main reason for this is that about two-thirds of the equipment used in the domestic network is still being imported.
Foreign loan costing will increase
He said that a prolonged fall of the rupee against the dollar may also increase the cost of repaying foreign loans. The main reason for this is that 30 to 40 percent of the total loans in the telecom sector are in dollars. Jio recently raised more than $4 billion in offshore loans to buy 5G network gear, while the bulk of Airtel's annual capital expenditure of about $3.5 billion is going to be spent on 5G roll out. Top
Rupee can reach near 85 against dollar
Bankers admitted that the military conflict that started in West Asia has created new adverse conditions for the local currency. The demand for dollars has already increased significantly. The value of emerging market currencies like rupee is continuously decreasing. However, he said that the Reserve Bank of India (RBI) is continuously intervening in the currency market through the sale of dollars from its reserves to prevent excessive volatility. Anindya Banerjee, Vice President of Currency Derivatives at Kotak Securities, said in a media report that if the conditions remain unfavorable and last for a long time, the rupee may fall to Rs 84.50 against the dollar.
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